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PCG Gets Regulatory Approval - Analyst Blog

Californian utility,
PG&E Corporation
(
PCG
) received approval from California Public Utilities Commission
to buy power from the 150-megawatt solar-thermal project from
Rice Solar Energy, LLC. Per the agreement power from the project
would be sold to Pacific Gas & Electric utility for 25 years
beginning Jun 1, 2016. The 150 megawatt (MW) Rice Solar project
is proposed to deliver estimated annual generation of 448
gigawatt hours (GWh) over a term of 25 years.

The project will use thousands of mirrors to focus sunlight
onto a central tower containing molten salt, which is funneled
through a steam generator to produce electricity. The salt
retains heat and can produce power at night, an advantage over
photovoltaic panels that cost less but work only when the sun is
shining.

Rice Solar is a wholly owned subsidiary of SolarReserve LLC,
developer of solar thermal (power tower) generation facilities
that incorporate molten salt storage. The company is
headquartered in Santa Monica, California with offices in Madrid,
Spain and Sandtown, South Africa.

Going forward, PG&E will continue to focus on investing
new capital, consistent with California's focus on clean energy.
The company is mandated by California's renewable energy
portfolio standard to raise its renewable generation.
California's renewable portfolio standard requires utilities to
generate 33% of power from renewable sources by fiscal 2020.

We believe, going forward, favorable decisions from
regulators, long-term supply contracts, diversification into
alternative power sources and infrastructure improvement programs
will bode well for the company.

These positives, however, will be partially offset by risks,
including the present tepid macro backdrop, extent of San Bruno
liabilities, headwinds in the California economy, earnings
dilutive issuances and power-price volatility.

The company is expected to release its fourth quarter and full
year results on Feb 21, 2013. The Zacks Consensus Estimates for
the fourth quarter and full year 2012 are currently at 57 cents
per share and $3.19 per share, respectively.

We have a Zacks Rank #3 (short-term Hold rating) on the stock.
This implies that the stock is expected to perform in line with
the broader U.S. equity market over the next 1-3 months.
Consequently, we advise investors to remain on the sidelines for
the time being. In the near term, we would advise investors to
focus on its Zacks Rank #1 (short-term Strong Buy rating) peers
like
Ameren Corporation
(
AEE
),
Integrys Energy Group, Inc.
(
TEG
) and
Pike Electric Corporation
(
PIKE
).

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